Freezing Makes The Food Grow Brighter

Come on now if you don't open this e-mails with a title like that, you just don't want to keep getting this e-mail.  Space is limited you know.  We have 42 subscribers and only 100 slots.

Anyway we had a very hectic day today.  An early teleconference, getting Jack off to school (23 days left), leaving all the construction details to my lovely wife AGAIN, checking on cash flow, calling the pool contractor, going through three days worth of mail,  cleaning up over 300 e-mails, and that was all before 11:00 am.  We had lunch with two of my direct reports and regular readers of this post.  I make it a condition of continued employment.  We had a meeting with the HR staff to find out why insatiable malcontents are never happy.  (I'll give you a second on that one, two, three, four.)  Then more e-mails.  And time to go home and take my lovely wife out to Hanna's.  (Sorry we had to sneak out on you Dave, but we will take a rain check on the dessert.  I was not happy as all we have is Fidsicle's at home.)  And that would be the segue to our title story.

After taking dogs 1,3,4,5 out to mark the back yard and going through the recyclable mail,

(Made the mistake of telling Devin she looked like one of the hottie models from the Boston Proper catalog to which commenced a conversation about why I thought the model looked like her.  SHOOT ME NOW.) I decided to treat myself to a 100 calorie Fudsicle.  It was then and there I noticed there was not light in the garage where our overflow refrigerator is located.  The garage is really dark at night.  While slowly moving towards the vicinity of the fridge, all I could imagine were all the tools around me.  We got single blade saws and nail guns, and paint buckets, and slate working tools (You can tell by that name I know crap about tools.), and a cornucopia of hand tools.  When I got to the fridge, I opened the freezer door and realized, there is no light in the freezer.  Mmmmm, interesting. Are not frozen food worthy a small little light bulb?  Don't frozen peas rate 15 watt illumination?  Who decided that icy hot pads don't need light.  Groping in the dark made it hard to distinguish Fudsicles from Dryers fruit sticks.  Unfortunately even in the dark you could tell Fudsicles from Klondike Ice Cream Bars.  But perhaps that is too much digressing?

Billionaire Hedge Fund Manager Month

A couple of weeks ago I had the good fortune to meet and spend time with the Muzzy family.  Mrs Muzzy is the vice president of our son's school, here husband Steve is a Sr. VP at JP Morgan, and they all went along with his parents to Augusta for The Master's.  I met Steve's dad, Jim and delgithful very down to Earth kinda guy.  I was blown away and bit giddy to find out this charming older man was Bill Gross's co-founder of the world famous PIMCO fund.  I thanked the Good Lord I did not pimp any stocks to him during our several visits in Augusta.

Well I was invited by another one of our readers to join him for lunch yesterday in Beverly Hills. 

That in and of itself is not my cup of tea.  Don't get me wrong, I like Mr. Tunney, one of my golfin buddies and would have enjoyed just having a top drawer lunch with him in BH, but the invite was even more enticing than that.  Ya see his company, UBS is doing a private placement for The Millenium Fund, which is run by one Izzy Englander.  Izzy can be found as number 582 on the Forbes 400 list with an approximate net worth of 1.7 billion.  The lunch was with Izzy Englander.  Needless to say I took a vacation day and we arrived a little early as we had little traffic on our way into LA, (Gotta Love that 4.50 a gallon gas.) so when I was introduced to Mr. Englander as the PADI guy, he went off.  His whole family are PADI Divers. 

He described how active the family is scuba diving.  When I asked about him, he replied in a pronounced but inoffensive New Your Jewish dialect that while on Holiday in Bermuda he was all set to do (What I knew to be a PADI Discover Scuba Diving Course) and then the instructor started explaining Boyle's law of gas expansion and how the bubbles in his lungs and blood could expand cause an embolism and he said, get this tank off of me and he never tried the sport again, but his family had a great time and have been hooked ever after.

I offered my card to see if I could ever be assistance to him or his family and he said he could not wait to tell his wife who he had met today.  (True story and I had three witnesses.)  We hit it off so well he made me an offer to buy PADI two, three, four.  (Hope my readers on the PADI Board found that as funny as it looks?)  Just kidding, I got to pick his brain for about 15 minutes about certain aspects of investing and was surprised to find how laid back and simple his constancy of purpose was.

In essence he follows much of the CANSLIM investment  strategies espoused by William O'Neil of IBD fame.  Invest in your winners and QUICKLY dump your loosers.  He admits to having no grand master plan for returns for the fund, just that he wants to beat the market.  He has more than 800 investment/portfolio managers and he and three other execs manage by variance.  If a fund manager under perform for a month, they want to know and confirm they have dumped their looser.  If they under perform a second month, they better have a good reason.  If they under perform a third month they had better have an update C.V. as they are provided a career adjustment. 

They also thoroughly investigate upside variances.  If you have more than few great months in a row, there is suspicion that the manager is Too Good.  Think Galleon Group and Rajaratnam.  When asked what the return goal for the fund is Izzy rubbed his chin and said, "I dunno, we don't really have one."  Having realized that answer disappointed, he said, "11.1%, is that better?"  He explained his goal is to beat the market and if pushed to make 10 to 15 basis points a day.  (That would be .001-.0015% a day.)  That does not sound like much until you realize the fund has 11.1 Billion in assets.  Go ahead get out your calculators.  I'll wait.  Mmmmmmm, got it yet?  $11,100,000-$16,650,000 a day.

So if you were wondering why we did not post last night it is because we had a rewarding day in Beverly Hills hob knobbing with a billionaire.

Ok kids you can all go to bed now we are going to talk about making money and investment strategies.

A Picture Is Worth?

It is time to look at the Cronastics Chart.  Again this is the assimilation of the IBD Accumulation/Distribution rating for the S&P 500, the Nasdaq, and the percentage of companies in the NYSE over their 200 day average. 

Finally the chart is beginning to take on what could be the attributes of a guiding indicator.  Look at the drop after February 18 till March 2.  The value has dropped a full point from 6.8 to 5.7 and then the chart drops like a rock to April 7 and begins to bottom out.  Once we see the bottom form from April 8-April 14, we see it raise more than one point from -2.01 to-1.16.

So how does that equate to the market.  It appears as though you can make some prediction based upon the value behind the point and the velocity of the rise and fall of the curve.  You cans see the points start to stack between February 11 to February 18, creating a possible sell point.  The S & P peaked on the 18^th of February.  Now what we can't call is a sell point on March 16^th when the S & P hit its low.  The points don't start to stack until the 24^th of March and you would have missed the low.

We are liking what we are seeing, but the chart needs more history.

Easy Come Easy Go

We had been bragging about our monthly gains.  Our year to date realized (Money in the bank.) gains for the first three months were 6.01%.  As of the end of April we have realized gains of 1.23%.  We explained that we had some nasty ugly call options that expired worthless.  We will not be making that mistake again.  So we are almost back to where we started, but we can live with that.

We gave you a snap shot of our portfolio last week.  Since then we played a bearish play for insurance and sold some call options in JJG and DBA.  Again when you sell a call option you get the money upfront and only make money if the stock goes down.  Ideally it will go down enough that it expires worthless allowing you to keep the money you sold the option for.

After hearing some poor forward looking statements about FTNT Fortinet, Inc., together with its subsidiaries, provides network security appliances and unified threat management (UTM) network security solutions to enterprises, service providers, and government entities worldwide. The company's flagship UTM solution consists of FortiGate appliance products that offer a set of security and networking functions, including firewall, virtual private network, antivirus, intrusion prevention, Web filtering, antispam, and wide area network acceleration, we bought some PUTs and immediately placed some 30% stop order behind them.  They triggered in about 2 days.  We lost 30% on those options.  Same could be said for some call options we bought for VSEA.  We lost a quick 30% on those options.  Don't feel too sorry for us as in March we pimped and bought Richmont Mining at 6.57 a share and cashed out last week with a nice 21% gain.  It was a sizable position.  The stock is down  to 7.50 and change and headed lower.  We got a nice dividend on our 2033 CitiGroup 6% bonds.  Our 8% stop loss triggered on IRBT.  It will remain on our watch list as we still like the stock.  Our 8% stop loss triggered on OPEN and it too will remain on the watch list.  And today our stop triggered at profit (about 4%) on a sizable position on SLV.  The Silver ETN did very well for about 5 of our portfolios we work with.  The best return was 22%.  Our return was much lower as we eased our way into a very large position.  We were looking for 52 value but stopped out at 41.  We will watch and suggest a new entry point.

In The Market Today

The markets sold of some profit in an overbought market.  Volume was big for the second down day in a row.  Will IBD call it a distribution day?  We will see tomorrow.  The S&P 500 which closed today at 1,356  Has a new resistance point at 1,440.  Let's keep an eye on it to protect your gains.

Some noteworthy observations as we cross into the tomorrow part of the night.  Campbell Soup is looking attractive at $34.25, more homework to be done.  WE DO NOT OWN.  E-Trade lloks hot at 16.50.  WE DO NOT OWN.  Shorting CGX might be an interesting play as they are say bad things about themselves.  MAN Manpower the temporary worker company increased their dividend by 8% to 40 cents a share.  Its only a yield of 1.2%, but the increase might move the stock.  Look for Pappa John dough to rise as they beat and up their outlook for next quarter.  WE DO NOT OWN.  OPEN beat estimates and had positive statements to say.  We have some homework on that one, but not tonight.

Salve Lucrum